Indonesia bond is acid test for markets

Credit markets have got off to a good start in 2009, but Indonesia could find that sentiment is changing.

Bond markets are always the same at this time of year. Investors have lots of cash they need to invest and smart issuers take advantage of the liquidity, paying sensible new issue premiums and generally being flexible and accommodating. It is a happy time.

As January rolls on, borrowers get greedier and premiums come down. El Paso, an American junk-rated natural gas producer, is a particularly good example of how the rally has affected pricing. In December it...